Financial Results Presentation Materials for the Fiscal Year Ended March 2016 (FY3/2016) May 10, 2016 BOOKOFF CORPORATION LIMITED TSE First Section: 3313 0
Contents 1. FY3/2016 Financial Results Overview P2 2. Progress with Renovation P12 3. Policies for FY3/2017 P39 4. APPENDIX P61 Note Concerning Forward-Looking Statements The plans, strategies, and financial forecasts presented in these materials contain forward-looking statements not based on historical fact. Forward-looking statements are based on management judgments using information available at the time. Actual results may vary significantly from forecasts due to changes in the business environment and other factors. (Contact) Corporate Planning Department, BOOKOFF CORPORATION LIMITED 1
1. FY3/2016 Financial Results Overview 2
Financial Overview ¥75.6 billion (+3.0% YoY) Net sales -¥530 million (-) Operating income ¥5 million (-99.7% YoY) Ordinary income Profit attributable to -¥520 million (-) owners of parent 3
BOOKOFF Reinvention Story • Building a structure to secure inventory, net sales, and gross profits in excess of the cost of investment by supplying merchandise to YAHUOKU! and starting to deal in reuse home appliances Purchasing used home Gross profits on appliances home appliances ↓ Incremental sales of home YAHUOKU! gross Profits appliances profits on existing products Store gross profits Store gross profits on existing products Submitting store on existing products merchandise to YAHUOKU! Profits ↓ Higher personnel Faster turnover rate expenses and advertising ↓ expenditures Incremental sales of existing products Expenses Expenses Before the initiative After the initiative 4
Thinking on FY3/2016 Action • Purchasing is the source of the reuse business profits. For FY3/2016 we plan to work on staffing and systems, based on which we will actively invest in promotions to increase our purchasing base and so drive up profit levels. Profit pyramid* Operating income growth Profits Profits Net sales growth Net sales Purchases Purchases growth Promotions and advertising QSC (Quality, Service, Aggressive promotions Cleanliness) motto Training More staff, better systems will boost Staffing purchasing * Internal BOOKOFF diagram illustrating steps to securing store profitability 5
Current Situation • Progress with reinvention, effects of benefits from supplying merchandise to YAHUOKU! emerging. Home appliances on the way to growth. [Averages for small to medium-sized BOOKOFF existing stores] (1) Significant increase in personnel Mar. 2015 Mar. 2016 (Thousand yen) and systems expenses and other store costs to promote progress with strategy 8,300 9,000 Net sales (3) Large increase in head office costs (2) from creation and development of 3,500 3,700 Purchase amount (4) operating structure and investment in advertising and 5,200 5,500 Gross profit sales promotion activities, etc. (3) Emerging contributions to net 150 250 Variable expenses sales of and gross profits on existing products from supplying Store merchandise to YAHUOKU! (1) 1,600 1,800 Part-time staff cost costs (4) Insufficient expansion in sales and 2,750 2,800 Fixed expenses gross profits due to lack of growth in purchasing home appliances. 700 650 Store profits Headquarters sales support (2) 100 300 costs Unable to cover increase in costs, operating income decreased Operating income 600 350 6 6
Operating Income vs. Plan (Million yen) Initial plan Reuse Store Business Increase in workforce Aggressive investments for reuse home appliances, store-YAHUOKU! sales system and other new measures -470 500 Store- Cost for YAHUOKU! reuse home Effect of sales system appliances March 2016 warm winter -1,030 Key causes of difference on apparel -70 90 merchandise on single month basis -160 BOOKOFF HUGALL Monthly sales Online -230 plan shortfall Business Business -530 Effect of supplying Lower income in the FC business 170 books to -¥20 million -210 -120 BOOKOFF Discrepancies in cost estimates ONLINE -¥100 million Others -30 Online sales (including YAHUOKU!) from supplying books that (180) -180 have been on display in stores for more than a certain period to Results BOOKOFF Online 7
Financial Overview by Segment Reuse Store Business • Existing-store sales vs. FY3/2015: Up 4.2% • New stores BOOKOFF SUPER BAZAAR, BOOKOFF PLUS: 4 Repackaging from BOOKOFF to BOOKOFF PLUS: 1 • Supplying store inventory to YAHUOKU! (directly operated stores and some franchised stores) • Introducing reuse home appliances (directly operated stores and some franchised stores (with some exceptions)) • Increasing staff numbers to further introduction of new measures • Positively implementing promotions to support home appliances and mobile phone purchases 8
Financial Overview by Segment BOOKOFF Online Business • Expanded stores (21,000 m 2 to 35,000 m 2 ) to accommodate more merchandise • Commencing program of consolidating store book inventory • Initiating joint sales of BOOKOFF Online merchandise with YAHUOKU! HUGALL Business ・ Opened “One -Stop Purchasing Consultation Desk” at Nihombashi Mitsukoshi Department Store ・ Greatly increasing inventory stocking purchases by centering on affluent customers as our main target Packaged Media Business ・ Big decrease in sales following the sale of the TSUTAYA business in the previous fiscal year 9
YoY Change in Net Sales (Million yen) Others 32 Conversion of FC 513 stores to directly Sale of 733 HUGALL operated stores TSUTAYA Business Business BOOKOFF -4,188 Online 2,348 Business New stores 1,516 Existing stores +2,217 Closing of 76,564 2,092 stores -830 74,347 FY3/15 FY3/16 10
YoY Change in Operating Income (Million yen) 520 Higher -1,289 existing- store sales Start-up costs -255 Promotion costs -398 Costs for Effect of supplying inventory 1,127 new to BOOKOFF Online -197 measures -1,657 Increase in workforce -850 BOOKOFF FY3/15 HUGALL Corporate Online Provision Business expenses Business -530 for card 100 -38 -224 points Others Sale of -32 451 New TSUTAYA -234 FY3/16 stores Business -61 11
2. Progress with Reinvention ( Progress with the Group’s Medium-Term Business Plan) 12
Environment Recognition • The reuse market has grown for five consecutive years; ¥1.6 trillion currently. Forecast to reach ¥2 trillion. ¥2 trillion ¥1.6 trillion Annual growth 4% to 5% 2009 2014 2025 Source: The Reuse Business Journal "Second-Hand Business Data Book 2016" 13
Our Vision • People with experience of having utilized reuse still only account for around 40% of the population • To accomplish our mission of becoming BOOKOFF for people who don't let things go to waste, we are dedicated to creating a world where everyone has easy access to reuse items in order to achieve 100% reuse utilization Reuse utilization 40 % 100 % Current Target population Source: Used Article and other Reuse Promotion Business Research Council 2012 Report 14
Medium-Term Business Plan – Two Basic Policies Maximum purchasing – Leveraging the comprehensive power of the BOOKOFF Group – Maximum sales – Maximizing sales efficiency in stores and over the Internet – 15
Maximum Purchasing Maximizing purchasing options so that customers can sell when and where they want to sell On the go At home If selling books BOOKOFF HUGALL BOOKOFF Takuhonbin, home pick- In-store purchasing Dispatch purchasing up purchasing service consultation desk service Comprehensive reuse stores BOOKOFF SUPER HUGALL BAZAAR HUGALL “ReUse Smart at HUGALL BOOKOFF PLUS “ReUse Smart at anytime” shop type Home pick-up purchases anytime” condominium type 16
Maximum Sales Integrated Group store network and online to optimize range of products and customer convenience offered, with service tailored to suit our customers’ varied lifestyles Store Online BOOKOFF Online E-commerce website BOOKOFF SUPER BAZAAR 33 stores × Auction Store YAHUOKU! All group companies opening stores on BOOKOFF BOOKOFF PLUS YAHUOKU! auction website 758 stores 43 stores *Number of stores as of March 31, 2016. 17
Power to Drive towards the Realization of the World We are Aiming for Number one in real reuse Number one in online reuse YAHUOKU! Group’s abundant inventory supplied to Coordination in IT technology to YAHUOKU! promote supplying items to YAHUOKU! and the development of new services Developing services that link together store Promotions to exploit existing member services renewal and online operations Expanding inventory and boosting base Referring customers who have used purchasing by growing the range of items covered Yahoo services 18
Toward the Future Consolidated operating income ¥4 billion By FY3/2020 ¥10 billion Future target 19
Medium-Term Business Plan – Four Key Strategies Reinvent BOOKOFF – From BOOKOFF for books to BOOKOFF for all reuse items – Expand our comprehensive reuse stores – Create large and multi-format reuse stores for an overwhelming competitive advantage – Grow our BOOKOFF Online Business – Offer the largest possible book selection and expand into other product categories – Increase the scope of operations and revenues in the HUGALL Business – Advance from the business model launch to growth and profitability – 20
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